UK competition watchdog to examine Amazon's Deliveroo investment

By Kate Holton and Noor Zainab Hussain

(Reuters) – Britain’s competition regulator on Friday took action to pause Amazon’s <AMZN.O> investment in online food delivery group Deliveroo by serving an initial enforcement order on the two companies.

Amazon led a $575 million fundraising in Deliveroo in May, pitting itself against Uber Eats in the global race to dominate the market for takeaway meal deliveries.

The Competition and Markets Authority’s initial enforcement order is used when the watchdog has a concern about a transaction. It prevents businesses from pressing ahead with a tie-up, while the regulator decides if it needs to launch a formal investigation.

The regulator uses it if it suspects that two enterprises “have ceased to be distinct”, or that arrangements are in place or contemplation, which could result in the enterprises “ceasing to be distinct”.

Deliveroo said the two companies had been working closely with regulators to obtain their approval. It is likely to argue that the funding round would allow one of Europe’s fastest growing tech companies to expand into new areas, increasing competition and boosting the restaurant sector.

“There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition,” a spokesman said.

“This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers.”

Deliveroo founder and CEO Will Shu said in May that the fundraising would enable the loss-making group to increase its reach, develop technology and pursue innovations such as expanding its own kitchens that can be rented to restaurants to meet demand.

Deliveroo did not give a figure for Amazon’s contribution.

Deliveroo competes in Britain with Just Eat <JE.L> and with Uber Eats which is also present in North America, South America, Europe, Asia and Africa. It also competes in Europe with Takeaway.com and Delivery Hero.

Headquartered in London, Deliveroo uses 60,000 riders dressed in black and teal jackets to deliver meals from more than 80,000 restaurants and takeaway outlets in 14 countries including France, Germany, Hong Kong, Singapore and Kuwait.

Its “Frank” algorithm links the restaurants and riders with the customer, based on location, to cut the time of delivery.

The watchdog’s enforcement order does not prevent parties from continuing to talk to each other, but typically does prevent them transferring key staff or the transfer of commercially sensitive information.

Amazon had no immediate comment.

(Additional reporting by James Davey; Editing by Saumyadeb Chakrabarty and Jane Merriman)